Why Doesn't my Ambient Occlusion Texture Show Up Properly"
This is the node setup I would suggest:

And the 'Fac' slider will adjust the strength of the AO effect.

Things that may stop your AO/node shaders from working:


You're in multitexture mode (you must be in GLSL mode for node shaders to work)
You have node textures disabled (render settings, GLSL, the checkbox labled 'nodes')
You have unticked the 'use node shader' button for the material. I consider this most likely.